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from Breakingviews:

Tokyo stocks: this time could really be different

By Robert Cole

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Once bitten, twice shy. In fact, investors in Japan have been bitten many times by the seductive notion that the land of the rising sun is emerging from its bear-market night. They would be forgiven for shying away this time.

The temptation is there, though. The MSCI Japan index is up by a third since mid-November, helped by the yen’s steep decline against the dollar. Investors are drawing confidence from the promise of reflation by the new government of prime minister Shinzo Abe. Starmine data suggests that Japanese corporate earnings are on course to strengthen by 22 percent over the coming year - nearly twice the global average.

An analysis of valuation metrics also offers convincing reasons to be cheerful about Japanese stocks. The forward-looking price earnings ratio for the MSCI Japan index sits just below 14. That is a little higher than the equivalent for Europe and about the same as for the United States. But it is less than global average p/e ratio for the last two and a half decades. And today’s multiple is way below the Japanese average for the last 25 years — which sits at a princely 30. It is also lower than nearly 90 percent of all weekly readings for Japanese stocks since 1988.

from Breakingviews:

Equity split from commodities may be short lived

By Ian Campbell
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The often close correlation between equity and commodity prices has faded. World equities are up 15 percent since August while commodities have barely moved. Is this a paradigm shift? Probably not, though shale gas is rattling energy markets. Equities may simply have run too fast on the back of quantitative easing while commodity investors have hesitated over global growth worries.

from Breakingviews:

Weak yen makes Japanese electronics firms giddy

By Peter Thal Larsen

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

Japan's assault on the yen has produced some clear winners: investors in the country's beaten-up consumer electronics industry. Shares in Panasonic jumped 17 percent on Feb. 4 after the group reported a less-severe-than-expected quarterly loss. The hope is that stronger exports and recent cost-cutting will transform earnings. But with revenue still shrinking, the recent rally is largely based on hope.

from Breakingviews:

Japan helps Nomura put a bad year behind it

By John Foley

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Who wants to be a global investment bank anyway? Not Nomura. The Japanese financial group delivered a solid quarter-on-quarter boost in underlying pre-tax profit in the final three months of 2012, driven largely by a recovery in its home market. Last year’s insider trading scandal and subsequent resignations punctured the global dreams Nomura was pursuing when it bought parts of bankrupt Lehman Brothers in 2008. For investors, that may be no bad thing.

from Global Investing:

Hyundai hits a roadbump

The issue of the falling yen is focusing many minds these days, nowhere more than in South Korea where exporters of goods such as cars and electronics often compete closely with their Japanese counterparts. These companies got a powerful reminder today of the danger in which they stand -- quarterly profits from Hyundai fell sharply in the last quarter of 2012.  (See here to read what we wrote about this topic last week)

Korea's won currency has been strong against the dollar too, gaining 8 percent to the greenback last year. In the meantime the yen fell 16 percent against the dollar in 2012 and is expected to weaken further. Analysts at Morgan Stanley pointed out in a recent note that since June 2012, Korean stocks have underperformed Japan, corresponding to the yen's 22 percent depreciation in this period. Their graphic below shows that the biggest underperformers were consumer discretionary stocks (a category which includes auto and electronics manufacturers). Incidentally, Hyundai along with Samsung, makes up a fifth of the Seoul market's capitalisation.

from Breakingviews:

South Korea may need a rate cut to fight weak yen

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Japan’s weak yen policy could be South Korea’s biggest economic enemy this year. The strengthening won, which has risen 23 percent against the yen in the past six months, was partly to blame for the country’s anaemic GDP growth in the fourth quarter. It’s also putting the squeeze on manufacturers like Hyundai. Lower interest rates could help to ease the pressure.

from Breakingviews:

BOJ must now make its bold inflation goal credible

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

After more than a decade of feigning helplessness against falling prices, the Bank of Japan has finally signed up for combat duty.

from Global Investing:

Korean exporters’ yen nightmare (corrected)

(corrects name of hedge fund in para 3 to Symphony Financial Partners)

Any doubt about the importance of a weaker yen in thawing the frozen Japanese economy will have been dispelled by the Nikkei's surge to 32-month highs this week. Since early December, when it became clear an incoming Shinzo Abe administration would do its best to weaken the yen, the equity index has surged as the yen has fallen.

Those moves are giving sleepless nights to Japan's neighbours who are watching their own currencies appreciate versus the yen. South Korean companies, in particular, from auto to electronics manufacturers, must be especially worried. They had a fine time in recent years  as the yen's strength since 2008 allowed them to gain market share overseas. But since mid-2012, the won has appreciated 22 percent versus the yen.  In this period, MSCI Korea has lagged the performance of MSCI Japan by 20 percent. Check out the following graphic from my colleague Vincent Flasseur (@ReutersFlasseur)

from MacroScope:

Trade entrails

An exercise in divination using the entrails of last week's U.S. international trade report shows signs of a move with larger implications than just the gaping deficit that caught analysts wrong-footed: the possibility of a persistent burden on the American economy caused by Japanese and German imports, like in the 80s.

The U.S. trade deficit widened 16 percent in November to $48.7 billion, the Commerce Department said on Friday, above the $41.3 billion expected. The negative surprise prompted economists to cut hastily their U.S. gross domestic product estimates for the last quarter to a negligible rate. The stock market took a hit.

from Breakingviews:

Japan’s fiscal stimulus is call for action to BOJ

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Japan’s new prime minister has thrown the country’s central bank a $117 billion challenge.

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